US Airways Inc Retirement Income Plan for Pilots - Pension Benefit ...

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The electronic data shows that US Airways paid L__ _____ __j three lump sums on
July 15, 1998 from three different plans (see table below):
Lump Sums Distributed to I
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Pilo!s Plan $768,808.81
Target Benefit Plan $99,842.86
Top Hat Plan $104,252.53
Total Lump Sums $972,904.20
There is no record indicating that L__ _____ __jwas entitled to additional pension payments
from any of these plans after July 15, 1998.
The Pilots Plan's former actuarial finn, Towers Perrin, provided PBGC with a document
tit1ed "Pilots Minimwn Accrued Benefit as of January 1, 1998'' (Enclosure 4). 6 Although the
original of this document contains infonnation for a number of pilots, we redacted the names of
and information for other pilots to grotect their privacy. Enclosure 4 lists the foliowing
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information for (l) accrued Minimum Benefit balance as of January I,
1998 (as an annual amount); (2) the salaries used in computing his accrued Minimum Benefit
balance; and (3)0accrued benefit under the Basic Formula (as an annual amount).
Finally, the records for show that [] began receiving a monthly
benefit effective[] 1, 1998, and[]is currently receivinr a benefit from PBGC. For privacy
protection reasons, we have not provided details concerning_ !benefit amounts
in this decision.
B. Relevant Plan Provisions
The formal Pilots Plan document in effect when retired in June 1998 is
the Retirement Income Plan for Pilots of USAir, Inc., as amended and restated effective
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January 1, 1994 ("1994 Plan"). The 1994 Plan provisions relevant to the Appeal are provided in
Enclosure 5 to this decision and are summarized below.
The Pilots Plan's Basic Benefit Formula. The 1994 Plan, at Section 4.1, establishes the
following "Basic Formula":
4.1 Basic Formula. The yearly amount of basic retirement income payable under the
Plan to a Participant is equal to the sum of(A) and (B) less (C), ...
It is the Appeals Board's understanding that this document is a printout of information contained in electronic
records.
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The Pilots Plan document you provided as an exhibit to the Appeal is the Retirement Jncome Plan for Pilots of
US Airways, Inc. (as amended and restated effective January l, 200 I) ("200 I Plan"). Although the 2001 Plan is
similar to the 1994 Plan in many respects, the provisions in Section 7 titled "Maximum Defined Benefit Limitation"
differ. See footnote 16 in the Appendix to this decision.
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(A) 2.4% of the Participant's Final Average Earnings multiplied by the number of the
Participant's full and partial years of Credited Service up to a maximum of25 years;
(B) J% of the Participant's Final Average Earnings multiplied by the number of the
Participant's full and partial years of Credited Service in excess of 25 years, up to a maximum of
five years;
(C) the yearly amount of retirement income payable to the Participant under the Target
Benefit Plan; ...
The Minimum Benefit Provision. Pages 29-30 of the Consolidated Decision (Enclosure
1) provide a detailed explanation of the Pilots Plan's Minimum Benefit provision. Section 4.1 (D)
of the 1994 Plan, which is similar to the provisions in earlier and later Pilots Plan documents,
provides the following Minimum Benefit for pilots who were on the Allegheny Airlines Systems
Seniority List as of December 1, 1972:
(D) The amount of retirement income that would be provided (if it were detennined
without regard to any offset for benefits paid under the Target Benefit Plan) for a Participant who
was on the Allegheny Airlines' System Seniority List as of December I, 1972 shall not be less
than the amount to which D would have been entitled at his Benefit Commencement date or
Termination of Employment had the Plan continued in effect without change on and after
December 1, 1972 using actual Earnings and assuming, for the purposes of determining the
retirement income to which the Participant would have been entitled under the Variable
Retirement Income Plan, as defined in the Prior Plan, that had the Variable Retirement Income
Plan remained in effect, the investment performance thereunder, would be equal to the investment
perfonnance of the Standard and Poor's 500 stock index (unadjusted for dividends).
Maximum Defined Benefit Limitation. Section 7.1 of the 1994 Plan states:
7.1 Maximum Defined Benefit Limitation. As required by ERISA, the maximum
amount of yearly retirement income which may be paid to a Participant under this Plan may not
exceed the limitations contained in JRC § 41 S(b) of the Internal Revenue Code of 1986 taking into
account the special rule contained in JRC § 415(b ){9) ....
The Pilots Plan's Lump Sum Option. The 1994 Plan permitted a participant with an
employment tennination date on or after []Normal Retirement Date to elect to receive[]
benefit in the form of a 100% lump sum payment if the conditions (set out in section 10.4 of the
1994 Plan) were met.
C. Benefit Limitations under the Internal Revenue Code
The IRC §' 415(b) limits. IRC § 415(a) generally provides that a trust which is part of a
pension plan shall not constitute a qualified trust if "in the case of a defmed-benefit plan, the plan
provides for the payment of benefits with respect to a participant which exceeds the limitation of
subsection (b)." IRC § 41S(b), as in effect in 1998, provided that the hlghest annual benefit
payable under a defined benefit plan was the lesser of $90,000 or l 00% of the participant's
compensation.
IRC § 41 S(d) further provides for "Cost-of-Living Adjustments" ("COLAs") to the
415(b)(l )(A) amounts. The $90,000 amount cited above reflected a "base period" of the
calendar quarter beginning October 1, 1986, and in years after 1986 that amount increased
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